The Economic Cost of Crisis

Of the many costs of political crises and natural disasters, the longest lasting–and hardest to tally–can be the economic toll.

For instance, after the wave of revolution in the Middle East and North Africa known as the Arab Spring, economists at HSBC estimate that some $800 billion in potential gross domestic product has been lost over five years in the economies most affected.

There are a growing number of signs that Ukraine and Russia’s economies also will face devastating economic losses from their current geopolitical crisis. As Ukraine’s fledgling government has struggled to overcome an insurgency in the country’s eastern region, its economy has been on the verge of collapse. Its currency is 40% weaker than it was a year ago, and the International Monetary Fund has swooped in with a multibillion dollar rescue package. Before the pro-Russian government of former President Viktor Yanukovych was toppled in late February, the country’s economy had already been entrenched in a recession. Now the IMF expects Ukraine’s $1.76 billion economy to shrink 5% this year, a severe downgrade from the projection of 1.5% growth made last October, before the onset of the current crisis.

Russia is in danger of a prolonged recession as well, as its economy has been hit with multiple rounds of sanctions in response to its annexation of Crimea. The IMF recently slashed its growth forecast for the Russian economy to a mere 0.2% for 2014, down from a previous forecast of 1.3%.

California, meanwhile, is expected to face major losses in its agricultural sector as the state has suffered a drought for three years. The California Farm Water Coalition expects $7.5 billion in economic losses from the drought, including $3.6 billion from lost agricultural production.

About The Numbers

The Wall Street Journal examines numbers in the news, business and politics. Some numbers are flat-out wrong or biased, while others are valid and help us make informed decisions. We tell the stories behind the stats in occasional updates on this blog.